On a positive note, the pace of construction on new homes jumped 20.2% in April to an annual rate of 1.14 million, the highest level since November 2007. At the same time, permits for future construction rose 10.1%, also to annual pace of 1.14 million, marking the best level since mid-2008.
On a downbeat note, home builder confidence slipped in May, with the NAHB Housing Market Index falling two points to a level of 54, as the components measuring buyer traffic and current sales conditions fell. “Consumers are exhibiting caution, and want to be on more stable financial footing before purchasing a home,” according to the NAHB. “On the bright side, the HMI component measuring future sales expectations has been tracking upward all year, mortgage rates remain low, and house prices are affordable. These factors should spur the release of pent-up demand moving forward.”
The pace of existing home sales fell 3.3% in April to an annual rate of 5.04 million, as tighter inventories pushed prices higher. According to the National Association of Realtors, “April’s setback is the result of lagging supply relative to demand and the upward pressure it’s putting on prices. Housing inventory declined from last year and supply in many markets is very tight, which in turn is leading to bidding wars, faster price growth and properties selling at a quicker pace”. April’s inventory stood at 2.21 million existing homes for sale – a 5.3 month supply at the current sales pace.
Consumer prices moderated in April on weak gas prices, rising .1% after picking up .2% in March, while gas prices dropped 1.7%. Stripping out food and energy costs, inflation rose .3% – the largest increase since January 2013 – driven by housing and medical costs.